KURUKULASURIYA v. RANMENIKA

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Kurukulasuriya v. Ranmenika331
KURUKULASURIYA
V.
RANMENIKA
SUPREME COURT.
BANDARANAVAKE. J.. MARK FERNANDO, J. AND AMERASINGHE, J„S. C. APPEAL No. 12/87.
MAY 23 AND 25. 1990.
Landlord and tenant – Payment of rent for specific months – Appropriation of such rentagainst arrears of previous months – Deposit of arrears before summons returnable date.
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Where the defendant tenant has failed to aver that the agreed rent was in excess of theauthorised rent to support his plea that he was not in arrears, there is no burden on theplaintiff- landlord to plead the standard or the authorised rent. This objection was not takenat the trial or in the Court of Appeal or in the written submissions and therefore it was toolate to agitate the question in the Supreme Court.
Section 31 of the Rent Act, No. 7 of 1972 as amended provides for a continuance olthe tenancy and keeps in force retrospectively the original contract of tenancy despitetermination by notice. Once the contractual tenancy is ended by notice, the landlord losesno rights by accepting rent from the statutory tenant. The mere acceptance of rent isinsufficient to create a new tenancy. Acceptance of rent for a period subsequent to thenotice revives the tenancy only if from the facts established an intention to waive canreasonably be inferred. Every such payment does not ipso facto amount to a revival.Parties must be shown to have been ad idem as to the terms. A waiver of notice cannotbe presumed.
It was established that deposits of rent had been made with the local authority by thedefendant, mentioning the specific months for which rent was being paid. These weredrawn by the plaintiff without reservation. According to the principles governing appropria-tion of payments in the Roman Dutch Law the first general rule is that when there areseveral debts owing to the creditor and the payment made is insufficient to discharge theentire sum due the debtor has the right to declare at the time he makes payment which ofhis debts he wishes to reduce.
Since the debtor had elected to appropriate payment he made to specified months, theCourt must consider whether the debtor has been unreasonable in so appropriating thepayments. The debtor continued to occupy the premises and failure to pay rent wouldexpose him to an action for ejectment. The facts also disclose a course of dealing betweenthe parties, a pattern of making payments lor specified months from the very inception ofthe tenancy. The creditor was therefore entitled reasonably to believe that the debtorintended appropriation to be made for those designated months and no other. Consideringall the circumstances it cannot fairly be said that the debtor was unreasonable in what hedid. The creditor was obliged to consent to the appropriation of payments made by thedebtor. The Court should give effect to that decision.
Appropriation of payments by the operation of the Roman Dutch Law principle thatunspecified debts should be carried to that account which it is most beneficial to the debtorto reduce and that when accounts are of the same nature so as to make no difference tothe debtor the payment must be carried to the oldest account is applicable only in theabsence of a decision by the parties. This is not the case in the instant litigation.
Appropriation of payments is done at the time of making the payment. The statute does notprohibit the parties from exercising such an option either expressly or by way of inference.There is no conflict in this area between the common law and the statute. If the paymentsare appropriated by the parties in a certain way then the principles of the common law applyto those payments and they will be applied in the designated manner. The two streams oflaw will operate in all areas where there is no conflict.
Thus if payments so appropriated are sufficient to meet all the debts specified in the noticeof termination of tenancy, then the plaintiff will fail in his action. If not there will remainunpaid arrears of rent. Here there was a period of five months anterior to the months for
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which payments had been assigned in respect of arrears of rent for which rent was notpaid. Hence the tenant is in arrears and the plaintiff is entitled to judgment.
Cases referred to:
Ansar v. Hussain $. C. Appeal No. 71/80 – S. C. Minutes of 18.02.86.
Wellington v. Amerasinghe [1987] 1 Sri LR 45.
Ephraims v. Jansz 3 NLR 142.
Fernando v. Fernando 55 NLR 465.
Eastern Hardware Stores v. Fernando 58 NLR 568, 569.
Fonseka v. Naiyar AH 22 NLR 447.
Vincent v. Sumanasena 55 NLR 478.
Fernando v. Samaraweera 52 NLR 278, 283, 284, 285.
Attorney-General v. Ediriwickramasuriya 41 NLR 499.
Virasinghe v. Peiris 46 NLR 139.
Dias v. Gomes 55 NLR 357.
Perera v. Maggie Nona Hamine 76 NLR 547
Bardeen v. de Silva 66 NLR 547
Ramzan v. Sardar 73 NLR 380.
APPEAL from judgment of the Court of Appeal.
W. P. Gunatillake with J A. J. Udawatte, U. S. Sooriyarachchi and C. Gamage for plaintiff-Appellant.
IV. Rajapakse with C. Viknarajah and C. de Silva for defendant- Appellant.
Cur. adv. vult.
June 18. 1990.
BANDARANAYAKE, J.
This appeal raises a question of law whether if payment of rent is madespecifying particular months for which it is being paid could the rent beappropriated towards arrears due for a period prior to that month. Leaveto appeal on this question of law was granted by the Court of Appeal.
The plaintiff-appellant instituted action in the District Court as thelandlord of the premises in suit for ejectment of the defendant-respon-dent-tenant for arrears of rent in a sum of Rs. 900 and for damages at therate of Rs. 125/- a month until final disposal. The plaint was filed under theprovisions of the Administration of Justice Law, No. 44 of 1973. It wasstated as a material fact that the defendant had failed to pay rent fromOctober 1975. Notice to quit was given on 23.7.76 requiring the defen-dant to quit the premises on or before 10.11.76. Whilst admitting tenancy
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the defendant-respondent denied being in arrears of rent and prayed fordismissal of the action.
The case proceeded to trial on the following issuesPlaintiff's Issues :-
Was the defendant in arrears of rent in terms of s. 22 (2) of the RentAct, No. 7 of 1972 ;
If so, is the plaintiff entitled to the relief prayed for ?
•Defendant's Issues* •
Was the notice to quit sent by the plaintiff to the defendant valid inlaw as the arrears of rent demanded had been paid by thedefendant before he received the notice to quit;
Was the defendant in arrears of rent on date of institution of theaction ?
The trial Judge held that the defendant had before 19.10.77 the summonsreturnable date, deposited the entirety of the arrears payable and wastherefore entitled to relief in terms of s. 22 (3) (c) of the Rent Act.
It was the plaintiff’s case that he rented the premises to the defendanton 10th July 1971 on a monthly rental of Rs. 125/-on tenancy agreement -“P 1”. Plaintiff admitted taking an advance of three months rent at thecommencement of the tenancy “P 2". The plaintiff also admitted that thedefendant paid rent directly to the plaintiff until June 1975 -"P3" to “P48"- being counterfoils of rent receipts of the payments made. This lastpayment for the.month of June 1975 had been made only on 18.3.76. Nosettlement was possible before the Conciliation Board on the complaintof the plaintiff. Notice to quit was sent on 23.7.76 terminating the tenancywith effect from 10.10.76. The action was instituted as aforesaid on31.5.77. It was in evidence that from the month of May 1976 the defendanthad deposited monies in the plaintiff's favour with the local authority theKotte-Galkissa Gam Sabha as rent. Each such deposit made to the localauthority mentioned a specific month in respect of which the payment wasbeing made. Sometimes an amount more than the monthly rental wasdeposited. The overpayments also were appropriated by the defendant-
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debtor for specific debts (months). This was the defendants evidencegiven at the trial. The plaintiff withdrew these monies from the localauthority up to October 1977 all amounting to a sum of of Rs. 2,125/-although all arrears due to him as at October 1977 was, according to theplaintiff a sum of Rs. 3000/-. This was computed on the basis that theperiod specified in the notice of termination of tenancy as being the periodin which the tenant was in arrears was two years (i.e.) from October 1975to the date on which the tenant was required to appear in Court in answerto the summons which was 19.10.77. Thus two years rent at the rate ofRs. 125/- per month amounted to Rs. 3,000/-. The deficit of Rs. 875/-represented 5 months rent. According to the plaintiff’s computation thearrears of rent amounting to Rs. 875 – should be assigned for the monthsof October 1975 to February 1976 for the following reasons:-
The defendant stopped paying rent directly to the plaintiff afterJune 1975 ;
As the plaintiff has taken three (3) months advance rent at thecommencement of the tenancy the defendant has been givencredit for same which covers the period July to September 1975.Thus arrears are being claimed from October, 1975 as set out inthe plaint ;
The defendant has made deposits of monies as rent with the localauthority mentioning specific monthsforwhich rent was being paidreflected in counterfoils of receipts “P 3” to “P 48” and by thedefendant's own documents. The first payment has been as-signed by the defendant for the month of May, 1976 and otherpayments assigned in respect of March and April 1976 andmonths succeeding May 1976 – (i.e.) June 1976 onwards to thesummons returnable date.
The plaintiff claims that under the Roman Dutch Law of Contract oncethe debtor appropriates a debt by assigning a particular payment to aparticular debt that payment extinguishes the debt so specif ied. Counselcited "Lawof Contract” – Weeramantry, Vol. 2. p. 676 paras 701 onwards; and Walter Pereira’s “Laws of Ceylon" 2nd Ed. p. 772 ; Wessels “Lawof Contract in South Africa”, 2nd Ed. Vol. II, para 2294.
Learned Counsel for the plaintiff-appellant contended that the trialJudge and the Court of Appeal were in error in treating the deposits made
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to the local authority as rent tendered to the landlord in respect ol allarrears of rent claimed by applying the provisions of s. 22(3)(c) of theRent Act and ignoring the assignment of those payments by the defen-dant to particular debts. It was Counsel's submission that the saidprovisions of the Rent Act cannot be applied willi-nilli to a situation wherethere are a series of debts, and payments made in liquidation of thosedebts are directed to apply to specific debts by the debtor. In such asituation the Roman Dutch Law has to be applied to the payments soassigned at the time of payment. If a balance of unpaid debts is left theplaintiff was entitled to recover such balance as arrears of rent by meansof a properly instituted action. Had the defendant not assigned paymentsbe made in the manner he did, then it would have been different. LearnedCounsel for the plaintiff-appellant submitted that although this point of lawwas raised and argued before the Court of Appeal that Court had failedto deal with it in the course of its judgment.
Turning to the position taken by the defendant-respondent before thisCourt on the question of law raised in the reference, the only submissionmade in the written submissions filed by the defendant-respondent wasthat as the plaintiff has admitted that before the summons retunable datethe defendant-respondent had tendered Rs. 2,125/- to the local authoritywhich sum had been withdrawn by the plaintiff-landlord, the action mustfail in view of the supervening conditions of s. 22 (3) (b) of the Rent Actand that the decision of the Supreme Court in Ansar v. Hussain (1) wasauthority for this proposition. Also cited was the case of Wellington v.Amerasinghe (2) which held that where there is excess rent in the handsof the landlord there will be an automatic set off (i.e.) that the provisionsof the Rent Act determined the matter. In the course of oral submissionshowever respondents's Counsel also submitted that the Roman DutchLaw principle that was applicable was not that relied upon by the appellant(supra) but that unspecified debts should be carried to that account whichit is most beneficial to the debtor to reduce and that when accounts areof the same nature so as to make no difference to the debtor the paymentmust be carried to the oldest account – vide “Laws of Ceylon" WalterPereira, 2nd Ed. p. 772, items (3) (4) in the second paragraph thereof andEphraims v. Jansz(3) and Fernando v. Fernando(4) It was submitted thatin the instant case the debts were of the same nature.
In the course of the oral hearing before us learned Counsel for therespondent also sought to raise several other arguments for the first timewhich were objected to by the appellant. They were :
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that the standard rent has not been pleaded in the plaint andtherefore there was no mode of calculating arrears of rent ; youcannot demand more than the authorised rent ; that even theauthorised rent was not pleaded; that when a landlord comes intoCourt there must be certainty as to whetherthe proceeding was inrespect of premises the standard rent of which for a month doesnot exceed Rs. 100/- or which exceeded Rs. 100/- as differentprovisions of law applied to each such situation; thus a mandatoryprovision had been ignored ; this was therefore a fatal irregularitywhich voided the proceedings.
that the admitted acceptance of rent by the plaintiff-appellant fora period subsequent to the notice to quit amounted to a waiver ofthe said notice; that in the instant case there was no evidence thatthe withdrawal of monies deposited with the local authority by theplaintiff was made without prejudice to his rights in the actionand therefore acceptance of rent was without condition andamounted to a waiver of the notice of termination of tenancy dated26.7.76 – Eastern Hardware Stores v. Fernando(5) – and Fonsekav. Naiver AH (6).
It would be convenient to first dispose of the matters not mentioned inthe written submissions and raised for the first time at this hearing; inregard to (i) above viz; that the standard rent was not pleaded; the caseproceeded to trial on the basis of an agreed rent of Rs. 125/- per month.That being common ground and the defendant pleaded that he was notin arrears of rent, then there is a burden on the defendant to show at leastby way of an averment to that effect that the agreed rent was in excessof the authorised rent. There was no such averment. There was noburden on the plaintiff therefore to plead the standard or the authorisedrent. This objection was not taken at the trial and not raised in the Courtof Appeal or in the written submissions. It is too late now to agitate sucha question. In any event, the defendant was given three months notice oftermination of tenancy which is the upper limit and this would not havecaused him prejudice.
In regard to the question raised in (ii) above, viz: that the acceptanceof rent lor a period subsequent to the notice to quit amounted to a waiverof notice, it was held by H.N.G. Fernando, A.J. (as he then was) in thecase of Vincent v. Sumanasena (7) that during the pendancy of an action
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for ejectment under the Rent Restriction Act the tenant must c ontinue topay rent as it falls due. Failure to do so may, by virtue ol s t 4 ol that Actrender him liable to be sued again for ejectment in a subsequent actionon the ground of non-payment ot rent. Held, that during the pendency oian action for ejectment the tenant must continue to pay rent as it falls due.The Rent Act, No. 7 of 1972 as amended contains in s. 31 a provisionsimilar to s. 14 of the Rent Restriction Act. It provides for a continuanceof the original contract of tenancy. This provision thus keeps in forceretrospectively the original contract of tenancy. This being so the ratiodecidendi in the case of Vincent v. Sumanasena (supra) would apply.The acceptance of rent in the present circumstances does not amount toa waiver of the notice. Once the contractual tenancy is ended by notice,the landlord loses no rights by accepting rent from the statutory tenant.The mere acceptance of rent is insufficient to create a new tenancy. Theagreement to continue the tenancy must be proved. It must be shown thatthe parties were ad idem as to the terms. A waiver of a notice to quitcannot be presumed. Fernando v. Samaraweera (8);Attorney-Generalv.Ediriwickramasuriya (9); Virasinghe v. Peiris (10): Dias v. Gomes (11):Perera v. Maggie (12). .Acceptance of rent for a period subsequent to thenotice revives the tenancy only if from the facts established an intentionto waive can reasonably be inferred. Every such payment does not ipsofacto amount to a revival. Eastern Hardware Stores v. Fernando (5).
Turning to the question of law raised in this appeal it is common groundthat the defendant-respondent deposited monies with the local authorityas payment of rent for specific months. The triai Judge has accepted theevidence of the plaintiff in regard to these payments. A perusal of thedocuments produced – deposits of payment – show clearly that paymentol rent was being appropriated by.the debtor towards payment ofspecified debts at the time of payment. According to the principlesgoverning appropriation of payments in Roman Dutch Law the firstgeneral rule when there are several debts owing to the creditor and thepayment made is insufficient to discharge the entire sum due recognisesthe debtor's right to declare at the time he makes payment which of hisdebts he wishes to reduce. The debtor has the liberty to do so. This ruleis based on the principle that, all things being equal, the interests of thedebtor prevails over those of the creditor. It has been stated that “thewhole doctrine of the Roman Dutch Law as to appropriation of paymentsturns upon the intention of thedebtor either express, implied or presumed”
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– vide – Weeramantry “Law of Contracts", Vol 11, paras 701 -705, pp. 676-680; Nathan “Common Law of South Africa”, 2nd Ed. VoM 1, p. 659.
The facts of this case manifestly show the debtor's intention toappropriate against specified debts. Since the debtor (the defendant-respondent) has elected to appropriate payments he made in the mannerreflected by the facts the Court must consider whether the debtor hasbeen unreasonable in so appropriating the payments. The debtorcontinuedto occupy the premises. If he fails to pay rent he exposes himself to anaction for ejectment. The facts also disclose a course of dealing betweenthe parties, a pattern of making payments for specified months from thevery inception of the tenancy. The creditor was therefore entitled reasonablyto believe that the debtor intended appropriation to be made for thosedesignated months and no other. Considering all the circumstances itcannot fairly be said that the debtor was unreasonable in what he did. Thecreditor is obliged to consent to the appropriation of payments made bythe debtor. The Court should give etfect to that decision.
On the background of the law as stated above, it will be seen that onthe facts of this case, appropriation of the payments by operation of lawas contemplated by the Roman Dutch Law does not arise. The contentionof Respondent's Counsel (supra) that the rules by which payments areappropriated by operation of law should be followed in this case isunacceptable. Those rules which contain principles by which appropriationis decided by operation of law are applicable only in the absence of adecision by the parties. This is not the case we have before us.
It is left to consider whether the principles of the Roman Dutch commonlaw are applicable in an action brought under the statute – the Rent Act,No. 7 of 1972 as amended. Appropriation of payments is done at the timeof making the payment. The statute does not prohibit the parties fromexercising such an option either expressly or by way of inference. Thisbeing so, the provisions of s. 22 (3) (b) & (c) cannot be read as renderingnugatory the principles of the common law. In my opinion there appearsto be no conflict in this area between the common law and the statute. Ifthe payments are appropriated by the parties in a certain way, then theprinciples of the common law apply to those payments and they will beapplied in the designated manner. The two streams of law will operate inail areas where there is no conflict. Thus if payments so appropriated are
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sufficient to meet all the debts specified in the notice of termination oftenancy, then the plaintiff will fail in his action. But if not, there will remainunpaid arrears of rent.
To recapitulate the evidence accepted by the trial Judge, the notice oftermination of tenancy was dated 26.7.76. It declared that the tenant wasin arrears of rent from October 1975 onwards. The tenant was requiredto vacate the premises on or before 10.11.76. Thus three months noticeto quit the premises was given. The tenant had not paid rent after June
Then on 11.5.76 a deposit was made by the tenant to the localauthority at the same time appropriating that payment as rent for themonth of May 1976. Deposits made thereafter were also appropriated forspecified months. Over-payments were also made by the tenant oncertain occasions amounting to Rs.250/- In her evidence the defendant-tenant appropriated those overpayments specifically to the months ofMarch and April 1976 and that evidence was not contested. Action wasinstituted on 30.5.77. It was the plaintiff’s case that he had by October1977 withdrawn the total sum deposited by the defendant with the localauthority amounting to Rs. 2,125/- lying to his credit. The plaintiff'sevidence that was accepted by the trial Judge was that there still was abalance of Rs. 875/- due and owing to him as unpaid rent by the defendantas at the date on which the defendant should appear in Court in respectof the action as stated in the summons served on him. It was the plaintiff-appellant’s contention that the unpaid balance represents five monthsrent in arrears. Taking into account the obligation of the Court to upholdthe right of the debtor under the common law to appropriate payments tospecific debts, then it must be accepted that by such appropriation of thesum deposited (Rs.2,125/-) there was still a sum of Rs. 875/- owing up tothe date on which he had to appear in Court. Thus the unpaid dues withinthe period specified in the notice must relate to the five months in respectof which no appropriation has been made. viz. October, 1975 to February
It is no doubt a period anterior to the months for which paymentshave been assigned in respect of arrears of rent but they remain unpaidand the plaintilf is entitled to judgment.
I am of the opinion that all payments made by the tenant as at thesummons returnable date have been lawfully appropriated as rent for thespecified months leaving unpaid arrears of five months rent. This beingso the provisions of s. 22(3) (b) and (c) have no application as the tenant
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has failed to tender sufficient money to the landlord to meet all arrears ofrent specified in the notice to quit. In other words there was nothing leftin the Kitty for s. 22 (3) (c) of the Rent Act of 1972 to become operative.The authorities relied upon by the Court of Appeal, viz. Ansar v. Hussain(supra) which approved of Bardeen v. de Silva (13) and Ramzan v.Sardar (14) for holding that all arrears of rent have been terdered byapplying the provisions of s. 22(3) (c) are inapplicable and are irrelevant.Those cases have been decided upon different facts.
In this view of the law issues 1 and 2 should have been answered inthe plaintiff’s favour. The plaintiff-appellant is entitled to succeed in thisaction. I do not have the benefit of any views or findings by the Court ofAppeal on the question whether the principles of the Roman Dutch Laware applicable to the facts of this case.
Since the tenant was in arrears of rent for several months and heappropriated payments he made to specific months, the tenant must beregarded as having tendered arrears of rent for those months to thelandlord. If all the arrears so tendered were insufficient to discharge theentire sum due as. arrears then the tenant remains in arrears of rentwhether or not they were due for a period prior to the arrears paid up. I setaside the judgments of the District Court and the Court of Appeal andallow this appeal. As Counsel for both parties have intimated to Court thatthe premises in suit have since been sold and purchased by thedefendant – respondent who is in occupation the prayer for ejectment isredundant. The plaintiff- appellant is entitled to judgment, arrears of rentfrom October 1975 to February 1976 both inclusive and damages asprayed for, subject to the defendant-respondent’s right to prove paymentof the whole or part of rents due. The defendant- respondent shall paycosts in all three Courts.
FERNANDO, J. – I agree.
AMERASINGHE.J. – I agree.
Appeal allowed.